BELGIUM Law and Practice Contributed by: Aldo Engels, Emile Bauwens, Emma Parduyns and Vincenzo Vilardi, Loyens & Loeff
share in the overall loss based on the profit split method). The court ruled that a mere reference to the OECD guidelines to prove that another trans - fer pricing method is more appropriate is not sufficient to meet the burden of proof that lies with the BTA with respect to transfer pricing corrections. The court ruled against the posi - tion of the BTA as the BTA could not provide a transfer pricing study showing that, considering the Belgian entity’s functional and risk profile, a different transfer pricing method should have been applied. Furthermore, the BTA could not provide a benchmarking study in support of the proposed cost-plus remuneration. A reference to arm’s length remunerations accepted in previous APAs was not accepted here. Brussels Court of First Instance, 20 June 2023, No 2021/2991/A In this case, the court reviewed and assessed a Belgian company’s credit rating for deter - mining the arm’s length interest rate under an intercompany loan from a related Swiss lender. The loan had a floating interest increased with a credit margin dependent on the Belgian com - pany’s credit rating, which was determined by using Standard & Poor’s “Corporate Methodol- ogy” ( “S&P methodology” ). The BTA argued that S&P methodology was not correctly applied and considered that the credit rating of the Belgian company was understated, resulting in exces - sive interest payments. The court concluded that the BTA success - fully demonstrated that the taxpayer incorrectly applied the credit rating method but failed to prove the arm’s length interest underlying the tax correction. Subsequently, the court conduct - ed its own analysis to come up with a different credit rating, taking into account the impact of
implicit group support. It then allowed the BTA to determine a new interest rate based on the outcome of the court’s credit rating analysis and to issue a new tax assessment on that basis. The court hereby brings some nuance to the (high) twofold burden of proof to the BTA – ie, the BTA should demonstrate that: • the method applied by the taxpayer does not lead to an arm’s length outcome (either because the method is inappropriate or was incorrectly applied); and • another method providing another price is appropriate. This gives the BTA a second chance to come up with the correct price based on the court’s properly determined credit rating. 15. Foreign Payment Restrictions 15.1 Restrictions on Outbound Payments Relating to Uncontrolled Transactions Belgium does not have legislation on capital controls and does not impose other restrictions on outbound payments relating to uncontrolled transactions (except in exceptional situations, such as with UN sanctions). Belgium levies withholding tax on payments of movable income (interest, dividends, royalties) subject to various exemptions and treaty reduc - tions. Belgian tax law further includes various rules denying the tax deductibility of certain outbound payments in specific situations (eg, payments to tax havens).
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